Omnicom and WPP are clearing regulatory hurdles and preparing to merge. Both holding companies are also struggling in today’s tumultuous economic environment. WPP reported a 71% slump in profits for the first half of its financial year. For its part, Omnicom saw its revenue inch up by 4.2 percent in the second quarter, but its net income fall by 21.5 percent compared to Q2 2024.
“I have never seen a more volatile market,” WPP CEO Mark Read told The Guardian. “I think a lot of clients are distracted by the macro, tariffs, figuring out what to do.” Read, who announced his retirement from WPP in June, took over in 2018 when Sir Martin Sorrell stepped down.
Read merged agencies and sold off some business units, which helped cut net debt. However, shares in the business have fallen by two-thirds during his tenure. According to The Times of London, the challenges facing WPP are great, as it grapples with high-profile account losses, a macroeconomic slowdown, and the upheaval caused by the rise of artificial intelligence.
Analysts at the investment bank UBS say that WPP’s increased weighting towards creative work, which they estimate accounts for about 45 per cent of WPP’s revenue, has put them at a relative disadvantage. Let’s linger on this for a minute. The investment bankers seem to believe that the core of WPP’s offering isn’t where the money is.
Meanwhile WPP has been busy embedding AI into its processes, pledging to spend £300 million this year on WPP Open, its AI-driven operating system. Open was created by WPP’s AI technology company Satalia to “bring together the world’s most diverse dataset across media, performance, client, and industry insights.”
Furthermore, WPP claims that Open will “transform marketing with unparalleled levels of efficiency, creativity, and growth.” It sounds impressive. Analysts, however, say that any returns to be gleaned from the group’s use of AI are unclear at this time.
WPP’s incoming CEO, Cindy Rose, is leaving Microsoft to join WPP in September. Will her background in tech be helpful to WPP at this time? Forrester analyst Jay Pattisall told Digiday, “It’s important for WPP and Cindy Rose to remember that fundamentally, WPP is not a software company. It is a services company that leverages software for value in combination with its services.”
It seems like every company under the sun “leverages software for value.” I wonder if the heads of WPP and Omnicom ought to listen carefully to the stock analysts and management consultants (who want to see even more value from the leveraged software). It might be smart to look elsewhere for answers. It might help to ask different questions and focus on the fundamentals of the business.
Here’s a question…can you truly automate and optimize your way to success in the advertising industry? Or, do you need an earthier, messier, more natural process—one that elevates bright new ideas from the gifted creative people who already work for you?
Related
Discover more from Adpulp
Subscribe to get the latest posts sent to your email.
